AKSHAR AUTOMOBILES AGENCIES PRIVATE LIMITED ,MUMBAI vs. ASSISTANT COMMISSIONER OF INCOME TAX CIRCLE 1, THANE

The brief facts of the case are that the assessee, Akshar Automobiles Agencies Pvt. Ltd., is engaged in trading and servicing of motor vehicles, container warehousing and letting of equipment on hire. The assessee filed its return of income for A.Y. 2004-05 on 01.11.2004 declaring a loss of ₹ 1,28,795/-. In the first round of assessment proceedings, the Assessing Officer completed the assessment under section 143(3) of the Income-tax Act, 1961 (“the Act”) on 28.12.2006. Among other additions, the Assessing Officer added ₹11,00,000/- under section 68 of the Act on account of unsecured loans since the assessee did not file the loan confirmations and could not establish the genuineness of the transactions. After allowing set-off of brought forward losses, the Assessing Officer assessed the total income at Nil.

The assessee carried the matter in appeal before the learned CIT(Appeals). The learned CIT(Appeals) granted partial relief on the issue of rental and container storage income but confirmed the addition of ₹11,00,000/- under section 68 of the Act. Both the assessee and the Revenue thereafter filed appeals before the Tribunal. The Tribunal confirmed the relief granted by the learned CIT(Appeals) on the rental and container storage income. However, on the issue of unsecured loans, the Tribunal noticed that the assessee had placed confirmations and complete addresses of the creditors before it. The Tribunal also noticed that M/s Hira Coach Pvt. Ltd. had advanced ₹8,42,000/- and the documents required verification. The Tribunal therefore restored the issue of unsecured loans to the file of the Assessing Officer for fresh adjudication. Thus, the present proceedings arise from the second round of litigation.

Pursuant to the directions of the Tribunal, the Assessing Officer initiated proceedings under section 143(3) read with section 254 of the Act. The Assessing Officer confined the enquiry to the unsecured loans of ₹11,00,000/- received from M/s Hira Coach Pvt. Ltd. and M/s Maryn Forwarding Corporation. During the course of hearing, the Assessing Officer found that the assessee had filed a confirmation from M/s Hira Coach Pvt. Ltd. and also furnished a bank statement in the case of M/s Maryn Forwarding Corporation. However, the assessee did not file the returns of income, financial statements and other supporting documents of the creditors. The Assessing Officer therefore issued notices under section 133(6) to both creditors on 05.12.2017. The notice issued to M/s Maryn Forwarding Corporation came back unserved with the remark "left". M/s Hira Coach Pvt. Ltd. responded by letter dated 13.12.2017 but expressed its inability to furnish the complete details called for by the Assessing Officer. The Assessing Officer therefore found that the assessee had not established the genuineness of the transactions and the creditworthiness of the creditors. The Assessing Officer also observed that, when he confronted the assessee on 15.12.2017, the authorised representative expressed his inability to furnish further documents and subsequently agreed to the addition on 22.12.2017. The Assessing Officer accordingly again added ₹11,00,000/- under section 68 of the Act. After adjusting the brought forward losses, he assessed the total income at Nil.

The assessee again carried the matter in appeal before the learned CIT(Appeals). During the appellate proceedings, the learned CIT(Appeals) issued notices and the assessee filed written submissions. The assessee submitted that it had filed confirmations and bank statements and the Assessing Officer could have carried out further verification from the departmental records or by using the powers available under sections 131 and 133(6) of the Act. The learned CIT(Appeals), however, found that the assessee had still not furnished the complete returns of income, balance sheets and financial details of the creditors. He also took note of the fact that the notice issued to one creditor had returned unserved and the other creditor had not furnished the complete information. The learned CIT(Appeals), therefore, held that the assessee had failed to establish the identity and creditworthiness of the creditors and the genuineness of the transactions. He accordingly upheld the addition of ₹11,00,000/- under section 68 of the Act and dismissed the appeal.

The assessee is in appeal before us against the order passed by the learned CIT(Appeals) dismissing the appeal of the assessee.

We have heard the rival submissions and perused the material available on record. The learned Counsel for the assessee submitted that the assessee now seeks to file additional evidence placed at pages 55 to 90 of the Paper Book. According to him, these documents directly relate to the identity and creditworthiness of the creditors and the genuineness of the loan transactions and therefore require examination before the issue is finally decided.

We find that this is the second round of proceedings. In the first round, the Tribunal restored the issue to the Assessing Officer because the confirmations and other material relating to the creditors required verification. In the second round, the Assessing Officer again sustained the addition mainly because the assessee did not furnish complete financial documents of the creditors. The learned CIT(Appeals) has also sustained the addition substantially for the same reason.

At the same time, the assessee now seeks to place further documentary evidence on record. The learned Counsel submits that the documents placed at pages 55 to 90 of the Paper Book were not examined by the Assessing Officer and have a direct bearing on the issue under consideration. In our view, the Assessing Officer should examine these documents before reaching a final conclusion on the addition under section 68 of the Act.

Considering the overall facts, we are of the view that one more opportunity should be granted to the assessee so that the Assessing Officer can examine the complete evidence and decide the issue on merits. At the same time, we cannot ignore that the assessee had already received an opportunity in the earlier round before the Tribunal and again before the Assessing Officer but failed to place all the required evidence on record. We therefore consider it appropriate to restore the matter subject to a cost.

We accordingly admit the additional evidence and restore the matter to the file of the Assessing Officer for de novo consideration, subject to the assessee depositing a cost of ₹21,000/- with the Prime Minister's National Relief Fund. The assessee shall furnish proof of such payment before the Assessing Officer.

The Assessing Officer shall examine the additional evidence sought to be relied upon by the assessee along with the confirmations, bank statements, returns of income, financial statements and other supporting documents of M/s Hira Coach Pvt. Ltd. and M/s Maryn Forwarding Corporation. The Assessing Officer shall also the material already available on the assessment record. If the Assessing Officer considers any further enquiry necessary, he may make such enquiry in accordance with law. The assessee shall cooperate with the Assessing Officer and furnish the required documents within the time granted.

In the result, the appeal of the assessee is allowed for statistical purposes.